This is the situation the US faces, as it has passed the point of no return, its debts and obligations are so huge they simply cannot be met, even at the current ridiculously low rates of interest. Thus we are likely to see unprecedented volatility in markets, and while the PM sector now looks likely to be taken down with the rest of the market due to forced liquidation leading to indiscriminate dumping, it is likely to come roaring back later as the hyperinflation approaches, particularly in the US. The same blind panic and flight to cash may well cause the dollar and Treasuries to continue even higher temporarily, although with the fundamentals for the dollar and the US economy that much worse than in 2008, a savage reversal and bear market is likely to follow immediately the dust starts to settle.

Finally, we should note that although the markets appear to be drawing close to another 2008 style meltdown, there will be some big differences between the collapse in 2008 and the one that is looming. In the first place it could be considerably worse, as none of the underlying structural distortions and problems that led to the collapse in 2008 have been squarely addressed and dealt with - the problems have simply been swept under the carpet by the application of massive doses of additional liquidity and the further ramping of debt. Secondly we are not too talking about companies that are too big to fail needed to be bailed out at taxpayer�s expense, this time round we are looking at entire countries going bust - politely referred to as �sovereign defaults�, and unless other countries step up to the plate to bail out those heading for the rocks, they will have to bail themselves out - which means either devaluation of their currencies or self-monetization requiring a massive ramping of the money supply which will feed through into rampant inflation or hyperinflation.

We are going to go into full defensive mode, which means cash, protection of any open long positions with Puts, and the use of conservative bear plays primarily to preserve capital but also as a means to profit from the expected heavy declines, for given that markets tend to drop twice as fast as they go up, because panic is a more powerful emotion than greed, as made plain by the events of 2008, there is no reason why we should sit on our hands and pass up the opportunities that will be presented by the general misfortune. We will be looking at a range of bear plays whose chief purpose is to safeguard capital, but also have the capacity to make substantial gains, over the next several days on the site.

By Clive Maund

The positive thing about this chart is that it shows that gold could fall as far as the $900 area, or even the $800 area, without violating long-term uptrend support lines and ending the bullmarket. Given that the inevitable hyperinflation in the US is not expected to kick in for a while, perhaps 2 years, maybe 3, what could happen is that gold drops back to test either of the lower supporting channel lines shown on this chart, against the background of plunging commodity and stock markets, as in 2008, before turning higher and accelerating away to the upside as the expected hyperinflation approaches.

The crucial support at the February low held, but bulls should draw little comfort from this as the way that the market dropped back sharply to these lows and has then bounced suggests that it is marking out a Head-and-Shoulders top, and if it is then the current rally can be expected to peter out at or below the January high, which is the Left Shoulder of the pattern. From a practical standpoint what this means is that investors in the broad stockmarket are being presented with one last chance to get out before the index breaks down from this pattern, which would be expected to lead to a rapid and severe decline. There is an argument that as we approach hyperinflation there will be more money flying around to drive up the price of everything and that, therefore, the stockmarket could rally in points terms, or nominally, even as its real value is falling.